2016 Budget Summary

On 16 March 2016 George Osbourne presented his budget, the budget was followed by the publication of the finance bill on the 24 March. Here are the top key points affecting small business. Personal Allowance For 2017/18 the personal allowance will increase to £11,500 (2016/17: £11,000). The basic rate band will increase to £33,500 (2016/17: £32,000), resulting in a higher rate threshold of £45,000 for 2016/17. We have been told that the higher rate threshold will increase to £50,000 by the end of this parliament. New Lifetime ISA From April 2017 those under the age of 40 will be able to subscribe to a ‘Lifetime ISA’. Subscribers can pay in up to £4,000 a year until the age of 50 and receive a government bonus of 25%. Contributions to a Lifetime ISA will count towards the ISA contribution limit which will be set at £20,000 for 2017/18. Funds can be withdrawn without charge when the subscriber reaches 60 or purchases their first residential property worth £450,000 or less. The ISA will be ‘flexible’ and funds can be withdrawn at any time before the age of 60, subject to the subscriber losing their bonus (including any interest or growth thereon) and paying a 5% charge. More details should be released in Autumn 2016. Class 2 National Class 2 NICs will be abolished from April 2018. 4 NICs will be reformed so that the self-employed will continue to build entitlement to contributory benefits following the abolition of Class 2. We would expect an increase in the Class4 NIC rate, although this has not been announced yet. Micro-businesses allowances Two new allowances of £1,000 each were announced by the Chancellor, to be introduced from April 2017. The allowances are available for property and trading income and are aimed particularly at micro-entrepreneurs carrying out activities such as selling goods or letting their homes through online marketplaces. Individuals with trading or property income below £1,000 will no longer be required to declare or pay tax on that income. Whilst detailed information on these two new allowances is not available at the time of writing, we do know that they will work in a similar way to rent a room relief: if income from property or trading exceeds £1,000 the taxpayer will have a choice between deducting actual expenses from income or deducting the £1,000 allowance from income. Corporation Tax Rates The planned reduction in the rate of corporation tax to 19% on 1 April 2017 will go ahead as planned. 1 April 2020 the rate will drop to 17%. Loans to participators This will affect any client with an over-drawn director’s loan account. The rate of s455 tax will increase from 25% to 32.5% from April 2016. The new rate will apply to loans made or benefits conferred by close companies on or after 6 April 2016. Planned reduction in CGT rates One of the headlines from the 2016 Budget was the reduction of Capital Gains Tax rates from April 2016. The basic rate will reduce to 10% (from 18%) and the higher rate will reduce to 20% (from 28%). An 8% surcharge rate will apply to gains on residential property and carried interest, effectively keeping the rates exactly as they were. ATED related gains will also be chargeable at 28%. Trustees and personal representatives will...

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The Town That Took on the Taxman

  There was a great programme on the TV last night. “The Town That Took on the Tax Man’” You can catch up with it on iPlayer here: http://bbc.in/1nnmfQJ A group of traders from Crickhowell, set up a multinational tax avoidance scheme using the same techniques used by the likes of Starbucks, Amazon & Facebook to highlight the inequality in the tax system.* It comes to light that these large corporations have a special relationship with HMRC, they also have very expensive barristers and accountants and the deep pockets required to pay them in order to fight off HMRC when they are ultimately challenged. The sad truth is that the tax system is unfair. As a small business the relationship with HMRC is very different. You can be on the phone, listening to their on-hold music for an hour before ‘the computer’ will decide you should try again later and hang up. They will write to you with a deadline which has already passed by the time the letter is delivered and they will not respond to your letter for several months. So, the question I suppose many are asking is, can I set myself up an offshore company? Can I have a Dutch Sandwich? For many SMEs the answer will be no. The tax saved will be less than the legal fees in getting such a scheme set up and then successfully defended. It’s still not fair though is it? That’s what really hurts, we’re writing out the cheques while the multinational corporations are cutting deals. We’ll help our clients minimise their tax liability within the legal framework available, more importantly we’ll guide our clients through their business growth ensuring they know what they’re doing and are profitable. At the end of the day, we all should pay our taxes if we want to have an NHS, state-pension, roads and the emergency services etc but we would like to think it’s fair. Perhaps if the multinationals played along then the SMEs wouldn’t have to pay as much. I hope we get to find out how the Crickhowell traders get on, ultimately I think they’ll get stuck but good on them for trying and highlighting the inequity in the system. *I think Amazon and Starbucks have rearranged their tax affairs to ensure they do pay UK Corporation tax...

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Is VAT recoverable on car derived combi-vans?

HMRC have issued a list of makes and models of car derived vans and combi vans which VAT registered businesses can use to determine if the VAT paid on the purchase can be reclaimed as input tax. The issue is that VAT will normally be claimable in full on the purchase of a commercial vehicle. However if the vehicle purchased is a passenger car VAT is not recoverable unless it is used ‘exclusively for the purposes of a business’. Generally cars are therefore VAT ‘blocked’ and no input VAT is recoverable. The VAT guidance states: ‘Motor car means any motor vehicle of a kind normally used on public roads which has three or more wheels and either: a) is constructed or adapted solely or mainly for the carriage of passengers; or b) has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows’ Whether or not a vehicle is commercial is not specifically defined but instead the definition of a car excludes: vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver vehicles of more than three tonnes unladen weight caravans, ambulances and prison vans special purpose vehicles such as ice cream vans, mobile shops, hearses, bullion vans and breakdown and recovery vehicles vehicles constructed to carry a payload of one tonne or more. Many car derived vans are not cars for VAT purposes as they have no rear seats, have metal side panels to the rear of the front seats and a load area which is highly unsuitable for carrying passengers etc. HMRC have issued the clarification due to developments in the car derived van market, as some vehicles with a payload of less than one tonne have ‘blurred’ the distinction between cars and vans. If you would like help with this or any other VAT issue please contact us. Internet...

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Auto Enrolment

We’re posting a series of short blogs regarding auto enrolment, if you are an employer and you have staff this WILL apply to you. Too many employers are still burying their heads in the sand, the start date for the largest employer was 2012 and the smallest employers are caught in 2017. Read on and if your affected please get in touch and we’ll help keep you on the right side of the Pensions Regulator.   What is Auto Enrolment? Automatic Enrolment is being staged in over a period of six years, which started with the largest employers in 2012. Automatic enrolment means that, rather than having to choose which pension scheme to join, members of staff are put into one by their employer as procedure. If any staff member decides not to be in the pension scheme, they must opt out. You must write to all your staff to tell them how being auto-enrolled will affect them and allow other staff to join if they request to do so. The new scheme has been introduced to promote people to stay in pension saving, this is because statistically, people are living for much longer yet too many people aren’t saving enough – if anything at all, for what is presumably going to be a long retirement. The law on workplace pensions has been made easier for millions of people to save up for their pension, particularly those on lower incomes. All UK employers have to enrol their staff automatically into a workplace pension if they meet certain criteria and make contributions. If you are an employer in the UK, you must start enrolling staff into a pension scheme from your staging date, though there is an option to postpone the enrolment for three months. Does it apply to me? Are you an employer in the UK, with staff working for you? – If so, then yes, automatic enrolment applies to you and there are things you’ll need to do. We’ll be covering these in our next...

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2014 Budget Summary

Please find below our 2014 budget summary with the most relevant changes in the budget for our customers. Individuals Personal allowances For people born after 6 April 1948, the personal tax allowance for 2014/15 is £10,000. This will increase to £10,500 from 6 April 2015. For people born on 5 April 1948 or before, the personal tax allowance for 2014/15 is £10,660. From April 2015, spouses and civil partners will be able to transfer 10% of their personal allowance to each other, which means £1,050 in 2015/16. To be eligible to make or receive the transfer, neither party must be liable to tax at the higher or additional rate. Tax rates 2014-2015 The basic rate of 20% will be charged on income up to £31,865. The higher rate of 40% will be charged on income from £31,866 to £150,000. The additional rate of 45% will be charged on income over £150,000. Companies The main rate of corporation tax will be 21% from April 2014, falling to 20% from April 2015.   VAT The VAT registration threshold with effect from 1 April 2014 will be as follows:                                                                         Registration (£)                                            Deregistration (£) UK taxable supplies                       81,000                                                                   79,000   ‘Relevant Acquisitions’ from other EC Member States              81,000                                                                   81,000   Annual Investment Allowance   To continue to support business investment, the Government is doubling the Annual Investment Allowance to £500,000 from April 2014 until the end of 2015.   Other news   From 1 July 2014, cash and shares ISAs are to be merged into a New ISA – NISA – with an annual tax-free savings limit of £15,000. Savers will now have complete flexibility over the cash and shares mix within the overall limit of £15,000.   From April 2015, the starting rate of tax for savings income will be reduced from 10% to nil. The maximum amount of taxable savings income that will be eligible will rise to £5,000 from £2,880.   From 1 June 2014, the cap on Premium Bonds will rise from £30,000 to £40,000, increasing further to £50,000 in 2015/16. From August 2014, two £1 million prizes per month will be on offer, instead of the current one.   And finally…   HMRC is going to be given debt collection powers to recover money direct from the bank and building society accounts, including ISAs, of debtors who owe over £1,000 of tax or tax credit debts. HMRC will use this route after the debtor has been contacted ‘multiple times’. A minimum of £5,000 will be left ‘across’ debtors’ accounts after the debt has been recovered. I think we’ll blog more about this later, this is a new tactic by HMRC who don’t have a reputation for getting their calculations right and so this is probably something to be concerned...

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Submit the tax refund request

Have you received an e-mail from HMRC entitled, “Submit the tax refund request”? These things always seem to be going around and it comes as no surprise that as the 31st January tax return filing deadline approaches, the scammers are up to their tricks again. If you receive an email purporting to be from HMRC, advising that you are due a refund, do NOT open it. You should delete it. HMRC will never email you to advise of a refund, all refunds are advised in writing and they will never email you asking to verify your card. Here is an example of a scam (phishing) email: HMRC didn’t send this email. It is just an attempt to get your financial details.    ...

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